Standing Committee A

[Mr. Roger Galein the Chair]

Registration of charities

Martin Horwood: I beg to move amendment No. 88, page 11, line 39, leave out ‘(subject to subsection (11))’.

Roger Gale: With this it will be convenient to discuss the following amendments: No. 89, page 11, line 42, leave out paragraph (11).
No. 20, page 12, line 3, at end insert—
‘(12) Regulations made under section (11) may exempt only part of the copies from public inspection.’.

Martin Horwood: I shall be brief. The amendments relate to public access, transparency and openness. The proposed section 3(10) of the Charities Act 1993 is laudable and the principle that copies of charity trusts should be open to inspection at all times is desirable. It is therefore strange that proposed subsection (11) has a qualification that is not explained or justified. I wonder whether it has accidentally fallen into the Bill or whether there is a perfectly rational explanation for it. I look forward to the Minister’s comments.

Andrew Turner: How nice it is to see you once again this morning, Mr. Gale. The hon. Member for Cheltenham (Martin Horwood) must be optimistic because he is still wearing his summer suit. I understand why he wishes to expunge the subsection. I have looked on GuideStar and believe that the subsection covers charities such as women’s aid charities that might have registered addresses or even names of trustees who might be subject to pressure were they to become widely known. Amendment No. 20 is designed to allow only part of the details that are recorded by the commission to be withheld from public inspection. It is not necessary to do either all or nothing; the Government should have the opportunity to go part-way on such matters.

Edward Miliband: It is nice to see you back in the Chair, Mr. Gale. The amendment is worth considering properly. I shall briefly explain the position for the benefit of the Committee. The hon. Member for Isle of Wight (Mr. Turner) rightly raised the issue of when disclosing the name of a trustee may place that person at risk. The Charity Commission has a dispensation to remove such information from its register. A separate power is available only to Ministers, which is to restrict access in respect of the trusts of a charity. The power has existed for 45 years or so since the early 1960s, but has not been used by Ministers. Labour Members will know that Aneurin Bevan said that the purpose of getting power is to be able to give it away. In that spirit, I make a commitment to the Committee to consider whether the power is really necessary. My immediate presumption is that it probably is not, but I shall come back on Report and I hope that I will have good news then.

Martin Horwood: I should have also said that it is good to see you in the Chair, Mr. Gale. I am encouraged by the Parliamentary Secretary’s comments and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Andrew Turner: I beg to move amendment No. 160, page 12, line 8, after ‘charity’, insert
‘the gross income of which does not exceed £100,000’.

Roger Gale: With this it will be convenient to discuss the following amendments: No. 21, page 12, line 20, leave out ‘£5,000’ and insert ‘£10,000’.
No. 161, page 13, line 11, leave out ‘different’ and insert ‘higher’.
No. 162, page 13, line 22, after ‘(7)’, insert ‘(a)’.
No. 90, page 13, line 22, leave out from ‘unless’ to end of line 25 and insert
‘a draft of the order has been laid before, and approved by a resolution of, each House of Parliament.’.
No. 91, page 13, leave out lines 33 to 36.
No. 163, page 14, line 32, at end insert—
‘(6) Subsections (1) to (5) of this section do not apply to exempt charities.
(7) An exempt charity which is required to be registered on the register of charities shall supply for inclusion the name of its principal regulator.’.

Andrew Turner: Amendments Nos. 160 to 163 are about exempt charities. When I acquired my responsibility, I seemed odd that, although the Charity Commission has a list of most charities, I had to search quite a lot in the depths of the legislation to find which charities are exempt. I found a useful page in the Charities Act 1993 that contained a long list of exempt charities as well as a long list of gaps. One then has to go further, because things have been removed, to find out which things have subsequently been added to that list at different stages. One then finds that the Minister will have the power to create new exempt charities.
Amendment No.160, regarding the proposed new section 3A(2)(a) to the 1993 Act, would mean that an exempt charity would be subject to the same requirement to register with the Charity Commission as excepted charities. That is to say, they are not required to register if they have an income that does not exceed £100,000. Most exempt charities have an income that exceeds that figure, because they are creatures of Government and are therefore well funded by them or because they are long-established organisations, such as the Church Commissioners. Therefore, my proposal would require exempt charities to register except those which have an income of less than £100,000.
Amendment No.161 is about the power to vary the threshold of any charity that registers. It would mean that the Secretary of State is limited to raising the threshold and could not lower it. We have heard how onerous registration might be for some charities.
Amendment No.163 continues the theme of exempt charities. It sets out that they would not be required to do anything other than register, except to provide the name of their principal regulator. As they have a different regulator, they would not be required to do any of the other things that charities have to do, such as supplying documents to the Charity Commission. However, they would be required to supply the name of the principal regulator. I hope that—because it was too late to put that under the responsibilities of the commission—the commission would take that information about the name of the regulator and include it in the register. Amendment Nos. 161 and 162 are about raising the thresholds for registration.
I turn now to amendment No. 21. On Second Reading, we heard that there are 190,000 charities, and 420 charities of them responded on the issue of the thresholds to registration—the maximum response to any part of the consultation—and that is a poor response rate and even lower than we would find in the European elections. It suggests that the voluntary and charitable sectors have had no detailed engagement with the consultation. It undermines some of the conclusions that were reached in the preparatory stages of the Bill, whether by the Government or the Joint Committee.
The strategy unit recommended a lower threshold of £10,000 for mandatory registration, permitting smaller organisations to register if they wished to do so. The Government responded to the review’s recommendation of £10,000 by going for £5,000. I am not entirely clear about the reasons for that except that they may have split the difference, an understandable Government position but one that does not seem to have any justification. The Minister in the House of Lords agreed with that when he said:
“We can see that there is some merit in raising the threshold to £10,000. But it is not a step we should take without there being full consultation because the figures in the Bill have been consulted on”.—[Official Report, House of Lords, 28 June 2005; Vol. 673, c. 231.]
It is true that the Government consulted on the figures, but the response rate was pretty low. One theory was that no one would be allowed to register below £10,000, but that was removed as a result of the consultation. I do not see any particular justification for the figure of £5,000, and I do not see anything particularly bad about the figure of £10,000. I commend the amendment to the Committee.

Martin Horwood: Amendment No. 90 is designed to address the Secretary of State’s power to change the list of exempt charities, to which the hon. Member for Isle of Wight has referred, and the income threshold for the registration of charities.
The power is critical. It will affect the status and the regulator of any number of exempt charities or charities that might become exempt, including significant bodies such as the ancient universities and other charitable and benevolent institutions. It deserves proper consideration, and Parliament should have the opportunity to consider it in full. That is why amendment No. 90 would require an order to be
“laid before, and approved by a resolution of, each House of Parliament.”
Amendment No. 91 examines proposed new section 3A(10)(b). It is not so much a probing amendment as a cautionary one. It is clear that an alternative is necessary to simply referring to a charity’s gross income during its previous financial year, because that can sometimes be misleading. The obvious example is an organisation such as Comic Relief. In the year of a red nose day, its income is in the tens of millions; in other years, it is much less. Charities’ incomes rise and fall. Occasionally, they rise and fall for other reasons that are much less predictable. The classic example for smaller charities involves legacies. A run of good legacies during a couple of years can double or quadruple a small charity’s income compared with that for previous years, but that is not necessarily a guide to subsequent years’ performance, which might be much less.
The idea that the commission will reliably be able to estimate a charity’s likely gross income stretches its powers of prediction. It is often difficult enough for the charities themselves to predict their income the following year, for reasons other than legacies. The value of investments can rise and fall suddenly. One charity with which I was involved relied heavily on an endowment fund. When the stock market—I hate to say “crashed” in a Minister’s presence—experienced a seasonal fluctuation, the charity’s income dropped unexpectedly.
It is a difficult clause. The Association for Charities included in its dossier an example of the Charity Commission estimating income quite wrongly in the case of the Cancer Care Foundation. I am not sure what the alternative is, but I am sure that the present measures are not a good way forward. I should like the Minister’s comments on the clause and how practical it is. However, the alternative might have something to do with being able to amend the provisions for income in the following year.
I turn to the Conservative amendments. Amendment No. 21, which would raise the threshold at which a charity must register from £5,000 to £10,000, seems laudable. In theory, we all want to lighten the burden of regulation on small charities, but we are talking about tens of thousands of charities. Many examples that we have encountered of less-than-perfect administration pertain to smaller organisations. It has been mentioned in previous sittings that failure to produce financial returns might be the first indicator that something more serious is wrong and might be the precursor to somebody disappearing with the charity’s money. Such a process leads to loss of donors’ money and public confidence, and ultimately to the damaging of beneficiaries’ interests. So I am not sure that it is always right to keep raising the threshold to remove more small charities.

Andrew Turner: Does the hon. Gentleman agree that although the percentage of inquiries affecting charities with income of less than £10,000 is 13.2 per cent., the income of such charities accounts for only 0.8 per cent of the gross income of charities? We need a sense of proportion. I fear that the Charity Commission, and charities themselves, are spending money haring after the possibility that some of that 0.8 per cent. of income is ill used, despite the fact that smaller charities spend far less on administration and fundraising than the larger charities do. The larger charities are probably wasting money but doing so in a reputable way, whereas the smaller charities, although they may from time to time lose money, lose a great deal less of it.

Martin Horwood: I think that what the hon. Gentleman is talking about is simply a function of the fact that the largest organisations generate a much higher percentage of the sector’s entire income. Two thirds of the sector’s total income is, I believe, generated by approximately 3,200 organisations, which constitute just 2 per cent. of the sector. The statistics can be worked any way, but even in charities that account for only a small percentage of the income, a well publicised scandal can damage confidence in the whole sector. That does no good to small or large charities. I am therefore content for amendment No. 21 to fall, and for the registration amount to remain at £5,000 for the time being.
I have no strong views on amendments Nos. 161 or 162. It seems desirable for the Secretary of State to have more flexibility on the time scale in which to raise or lower the threshold.
I am puzzled by amendment No. 163. The general tone of the contributions made by the hon. Member for Isle of Wight is of wanting to avoid red tape, yet despite exempt charities having regulators and being scrutinised, the amendment would make them subject to extra regulation just for the hell of it. They would have to supply their details to the Charity Commission for inclusion on the register and give the name of the principal regulator. I therefore oppose that amendment.

Edward Miliband: I shall start with amendments Nos. 160 and 163, which were tabled by the hon. Member for Isle of Wight. I accept the point made by the hon. Member for Cheltenham that the regulatory burden of charities should not be increased, and that is why I cannot accept the amendment. I am sympathetic to the idea of listing exempt charities that are regulated for charity law purposes by a principal regulator other than the Charity Commission, if it is possible to do that non-bureaucratically. It would be even better if there could be a comprehensive list that included those charities, perhaps with a little “e” next to them to denote that they were exempt. I do not know if that is possible, but I shall consider it and talk to the Charity Commission about it. The powers of investigation of the hon. Member for Isle of Wight are impressive, but it should be possible to see a list of exempt charities. I shall revisit that point on Report. I hope that that satisfies the Committee.
Amendments Nos. 161, 21 and 162 also deal with the threshold. We are sympathetic to the hon. Gentleman’s deregulatory aims and have said that there will be a review of all thresholds within a year of the legislation receiving Royal Assent. The Committee might like to know that, after the Bill is enacted, there will be a number of thresholds in charity law—£5,000, £10,000, £90,000, £100,000 and £500,000—that will have different requirements. We want to have a comprehensive look at such matters.
I take the hon. Gentleman’s point that, although there has been consultation on the Bill as a whole, it was not focused specifically on registration so we should consult on such issues and take into account the balance. The hon. Gentleman is right. We can think of a charity with, say, £160,000-worth of capital that might have a 5 per cent. return—£8,000 of income—but it is not clear to me that that charity should be outwith the requirement to register. We shall consult about matters within a year of Royal Assent and I hope that my reassurance has satisfied him in respect of amendment Nos. 161, 21 and 162.
On amendment No. 90, unbeknownst to him, the hon. Member for Cheltenham, has discovered a flaw in the legislation. It suggests that we may only vary the thresholds after a report has been submitted on the operation of the Act. We have made a commitment to submit that report within five years of Royal Assent, so that provision will get in the way of our ambition to have a review a year after Royal Assent. Thanks to the hon. Gentleman, we shall be coming back on Report to make good the flaw in the Bill. I am not sure that we agree with him about the resolution procedures, but we shall investigate that as part of the wider subject.
I come now to amendment No. 91 and gross income. It is important to realise that subsection (10)(a) clearly states that a reference to a charity’s gross income shall be construed, in relation to a particular time
“as a reference to the charity’s gross income in its financial year immediately preceding that time”.
That will clearly be the presumption of the Charity Commission. The only purpose of subsection (10)(b) is to deal with those circumstances in which a charity has just been set up and we would not want it not to have the obligation to register for the whole year during its first year of operation. The provision allows the Charity Commission to say that, on the basis of the charity’s expected gross income, it will be subject to a requirement to register. Similarly, if a charity faces difficult times and its income has dropped precipitously to below the threshold, it will be removed from the requirement to register on the basis of its expected gross income. I hope that that explanation has satisfied the hon. Gentleman.

Martin Horwood: It does not entirely satisfy me. If that is the purpose behind the clause, perhaps it should say so. The clause gives a much broader power than that.

Edward Miliband: I can honestly assure the hon. Gentleman that the Charity Commission will not ask the 190,000 charities in Great Britain, “What is your expected gross income? Is it different from the income in the previous financial year?” The clause will cater for such circumstances. I hope that he will accept my assurances in a charitable spirit and not press the amendment to a Division.

Andrew Turner: I am grateful for the Minister’s assurances on amendment No. 160 and grateful on behalf of the hon. Member for Cheltenham for his comments on amendment No. 90. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 9 ordered to stand part of the Bill.

Clause 10

Interim changes in threshold for registration of small charities

Question proposed, That the clause stand part of the Bill.

Andrew Turner: I wish to probe a little further. The clause seems to say that, if for whatever reason we do not introduce clause 9, we can take advantage of some of its benefits by replacing what is in the Charities Act 1993 about the thresholds for charities that have neither permanent endowment nor the use or occupation of any land under section 3(5)(c) or section 3(12) of the Act. I am not sure if the Parliamentary Secretary is saying that there will be delays.

Edward Miliband: There is a simple explanation. We have given a promise, to excepted charities in particular, that clause 9 will not be fully implemented before October 2007. However, we want to have the power to raise from £1,000 to £5,000 the general threshold for the requirement to register before that point. That is the reason why clause 10 will, in essence, explode once clause 9 is implemented. That will not be before October 2007 because that is the promise that has been made to the excepted charities.

Andrew Turner: I am grateful to the Minister for that explanation. As all explanations do, it generates a few more questions. Am I correct in understanding that the Minister does not intend to implement proposed new sections 3, 3A and 3B of the 1993 Act and therefore that the changes to excepted charities—or indeed to exempt charities—will not take place until October 2007 but that he does intend to raise the threshold for small charities? Therefore, some charities will be affected because they will be excepted. Is that what he is saying? May I invite the Minister to intervene? If he does not want to intervene, I will keep going.

Edward Miliband: The hon. Gentleman is correct. The provisions relating to excepted and exempt charities will not come into force before October 2007. Since the charities are excepted up to that point, they will not be affected by the increase in the general threshold from £1,000 to £5,000 which will take place before that date. That is simply to allow us to implement the new regulatory ambitions that we all share sooner than October 2007.

Andrew Turner: I am content with that explanation.

Question put and agreed to.

Clause 10 ordered to stand part of the Bill.

Clause 11

Changes in exempt charities

Martin Horwood: I beg to move amendment No. 94, in clause 11, page 15, line 8, leave out from ‘omit’ to end and insert
‘from “of” to end of paragraph and insert “England and Wales”.’.

Roger Gale: With this it will be convenient to discuss the following amendments: No. 165, in clause 11, page 15, leave out lines 16 and 17.
No. 95, in clause 11, page 15, line 17, at end insert—
‘(7B) After paragraph (b) insert—
“(c) any church, religious congregation, institution, or group of institutions which Her Majesty declares by Order in Council to be an exempt charity for the purposes of this Act.”’.
No. 96, in clause 11, page 15, line 21, leave out ‘National Lottery Charities Board’ and insert ‘Big Lottery Fund’.
No. 97, in clause 11, page 15, line 31, at end insert—
‘(10A) In paragraphs (c) and (x) no recommendation to make legislation is to be made to Her Majesty in Council unless a draft of the instrument has been laid before, and approved by resolution of, each House of Parliament.’.

Martin Horwood: I am afraid that I have left my copy of the 1993 Act elsewhere, so hon. Members will have to bear with me. Amendment No. 94 is intended to tidy up the messy area of exempt charities—a matter that I and many in the sector had hoped would be addressed by the Bill. There are historical anomalies in the list of exempt and non-exempt charities in the 1993 Act, such as the references to Winchester and Eton, Oxford, Cambridge, Durham and Queen Mary and Westfield colleges. Those references are now out of time. It is logical to replace the specific references with a reference to the universities and colleges of “England and Wales”, as the amendment proposes. That would lend complete consistency to the matter of whether universities are exempt charities.
Amendment No. 95 would extend, on a fair and equitable basis, the special treatment of the Church Commissioners and institutions administered by them. It would provide the opportunity for the Privy Council to make an exempt charity of any Church, religious congregation or institution or group of institutions through an Order in Council. That may have useful benefits for the non-established Churches—the Church in Wales may fall into that category—in respect of which the Bill appears to impose a registration requirement on far more organisations and congregations at local level than is the case for the Church of England. Again, there is a need for consistency and equity, which the amendment seeks to address.
Amendment No. 96 relates to the rather strange clause 11(9), which omits the National Lottery Charities Board without replacing it with its successor organisation. I am not clear why the Big Lottery Fund, the successor organisation, should not be treated in the same way as the National Lottery Charities Board was. I am looking forward to hearing the Minister’s comments on that.

Tom Levitt: I believe that the National Lottery Bill is currently being considered in another place, so the Big Lottery Fund does not yet exist. The fund only comes into legal existence when the National Lottery Bill has been passed.

Martin Horwood: The hon. Gentleman may be technically correct, although that does not stop the Big Lottery Fund from having its own notepaper and status, nor from issuing grants for several years. Nevertheless, it seems logical for the two Bills to be consistent. Without a copy to hand I am not sure whether the National Lottery Bill amends this Bill or the previous Act, but it seems logical—at least for this legislation—to refer to the institution that we know will be set up by the time that this Bill becomes law. If the lawyers are worried about the anomaly it might be just a question of getting the Royal Assents in the right order.
Amendment No. 97 is in the spirit of my earlier amendment and would permit alterations to the exemption of charities to happen only after the relevant statutory instrument had been laid before each House, and approved by resolution of each House. It reflects the importance of exempt status and the significance of that status for the affected institutions.

Andrew Turner: My amendment would omit the provision on page 15 that omits the Church Commissioners. I understand that the reason for that omission was that nobody could think of anyone to be the commissioners’ principal regulator. I am not sure if that is true, but the commissioners are quite a respectable body of people. [Interruption.] Some of them are, anyway. Mr. Speaker is a Church Commissioner, for example. On the other hand, so are the First Lord of the Treasury, the Lord Chancellor—if he continues to exist—the Lord President of the Council, the Secretary of State for the Home Department, the Secretary of State for Culture, Media and Sport, the Archbishop of Canterbury, the Archbishop of York, the hon. Member for Middlesbrough (Sir Stuart Bell), three other right reverend prelates in another place, and one who is not in the other place, and someone called Canon P.N.E Bruinvels; some of us have heard of him. Along with them are a number of luminaries elected by the General Synod.

Peter Bottomley: For the sake of clarity, our former friend Peter Bruinvels is a lay canon of Guildford cathedral.

Andrew Turner: I am grateful for that confirmation, though it somewhat undermines parts of my original argument. None the less, the commissioners are mostly a respectable bunch of people, and I see no reason why they should be omitted from being an exempt charity—for all the reasons that the hon. Member for Cheltenham gave in respect of the church in Wales.

Edward Miliband: Let me deal with this clutch of amendments as briefly as I can. It is a rare occurrence but I think that the hon. Member for Cheltenham simply misunderstood what amendment No. 94 would do. So far as we can see, the only effect of it would be to omit the colleges of Winchester and Eton whose exempt status is removed by the Bill. I know that that is not the intention of his amendment, but that is the effect.
Let me clarify what the clause does on higher education institutions—the specific issue that he raised. Higher education institutions, with the exception that I shall describe, will for the most part remain exempt charities subject to principal regulation by the Higher Education Funding Council for England. There is a particular issue around the colleges and halls of Oxford, Cambridge and Durham, which have no relationship with the HEFCE and which therefore need a different principal regulator. That regulator will be the Charity Commission. Had we included that in the Bill, however, it would have made the Bill a hybrid Bill, which would further have elongated the process of enacting it. We will therefore make provision for the colleges and halls of Oxford, Cambridge and Durham to be regulated by the Charity Commission in secondary legislation. That is the long and the short of the position on universities. The hon. Gentleman’s amendment is unnecessary and would not achieve its purpose.

Martin Horwood: I am not entirely sure that the Minister is correct, although I am struggling without a copy of the 1993 Act in front of me. [Interruption.] I am grateful to the hon. Member for Isle of Wight.

Peter Bottomley: On a point of order, Mr. Gale. Is the problem partly the distinction between the amendment to the Bill or that the hon. Gentleman may be making an amendment to the 1993 Act?

Roger Gale: I do not think that what the hon. Gentleman said is a point of order for the Chair.

Martin Horwood: I am grateful to the hon. Gentleman for his intervention. I am aware that I am amending the schedule under the 1993 Act. The amendment that was tabled was an amendment to schedule 2. I am sure that that was intended.

Roger Gale: Shall we allow the hon. Gentleman time to gather his thoughts and perhaps intervene later?

Edward Miliband: Again in the spirit of good faith, I hope that the hon. Gentleman accepts my assurances. I spent a long time last night trying to understand the nature of his amendment. It rather ruined my night’s sleep. However, having talked to officials this morning, I concluded that I am indeed correct and that his amendment is not fit for purpose. It would not achieve what he wants, apart from in relation to Winchester and Eton, which I am sure he wants to be regulated by the Charity Commission. I am sure that he does not want them to be exempt. I have panoply of choices before me.

Andrew Turner: This may be an unfair question, but why would the omission of the colleges and halls of Oxford, Cambridge and Durham universities make the Bill a hybrid Bill, whereas the omission of the colleges of Winchester and Eton would not?

Edward Miliband: It is an unfair question, but I shall try to answer it none the less. I understand that Winchester and Eton are covered by the Bill on the same footing as other schools, whereas if we single out the colleges and halls of Oxford, Cambridge and Durham, they will be put on a different footing from other higher education institutions. It is necessary to put them on a different footing because they do not have a relationship with HEFCE, nevertheless it would make such a measure a hybrid Bill. That takes us to secondary legislation. Because there will be a discrete class for the purposes of any order that is made, issues of hybridity will not arise because such matters will be treated as a distinct class and will not be compared with other higher education institutions. I hope that I have satisfied the hon. Gentleman.

Peter Bottomley: Is the secondary legislation the power that is included under subsection (12)(a)?

Edward Miliband: That was definitely an unfair question. Yes, the hon. Member for Worthing, West is correct. I hope that I have dealt with amendment No. 94.

Tom Levitt: I am grateful to the Parliamentary Secretary for the extreme clarity that he has brought to this discussion and his confirmation that universities will remain exempt charities under the 1993 Act. Are there implications for the National Union of Students? Can it qualify for charitable status in some form or another? I know that several hon. Members have expressed interest in that.

Edward Miliband: My hon. Friend asks an important question. Whatever their views on the National Union of Students, it may surprise some Opposition Members to learn that it currently has charitable status. The matter has been tested in the courts and we expect that the National Union of Students will continue to enjoy charitable status.

Martin Horwood: Now that I have gathered my thoughts on the amendment, the proposal would create exemption for all the universities of England and Wales, including those of Oxford and Cambridge, but that does not extend to the colleges and halls, which are not universities and are separate legal institutions. Can the Minister clarify who the regulator is of the universities of Oxford and Cambridge, as opposed to the colleges and halls which form parts of those universities and are legally separate bodies? I will then accept his reassurances on that amendment.

Edward Miliband: That is not so much an unfair question as an incomprehensible one. To the extent that I understand the question, my answer is—if I may say so, I think that the hon. Gentleman misunderstands the 1993 Charities Act—that the universities of England and Wales currently enjoy exempt status. What will change as a result of the Bill is that we will bring in a principal regulator, HEFCE for the most part, which will regulate them for the purposes of charity law.
Whatever the nature of his ambitions for his amendment, I can assure him that it is not fit for purpose. The universities of Oxford and Cambridge have a relationship with HEFCE and will be regulated by HEFCE as their principal regulator. I hope that he is satisfied with that and that I can move on to amendment No.95.
Amendment No.95 also stands in the name of the hon. Member for Cheltenham. Although it is meaningful, I confess that I do not understand why he wants to do it. It would allow an Order in Council to be made to declare an exemption for Churches and other religious organisations and make them exempt charities. At a time that we are driving to increase the accountability of other exempt charities, I cannot understand why he wants to do it.
On amendment No.95, I do not understand why he thinks that the Privy Council is an appropriate body to make those decisions. Does he want to give that power to Ministers anyway? I do not understand why he wants to give exempt status to Churches.

Martin Horwood: I am content with the intention of the Bill to bring Churches out of exempt status and under the registration of the commission. However, there are specific examples—I mentioned the Church in Wales—where that is not having the intended effect and is adding a level of bureaucracy to local, parochial Church Councils that does not apply to the Church of England purely because of their different institutional status.

Edward Miliband: I may be able to look into that. My understanding is that many Churches will have excepted status. The provisions under the Bill mean that only those excepted charities, with incomes over £100,000, will be required to register. I hope that those particular circumstances, which I am happy to look into, will be catered for by that.
It is convenient to deal with the matter of amendment No.165 in this context because it is about the Church Commissioners. I agree with what the hon. Member for Isle of Wight says about the Church Commissioners and, for the most part, that it is an august body. Again, I am not entirely convinced that the amendment is necessary.
The Church Commissioners will now be regulated by the Charity Commission. We have had discussions with the Church Commissioners. They had some concerns. Those concerns have been satisfied. Good order will prevail. They will be able to continue with their work. Therefore, I am not completely convinced that this amendment is necessary.

Andrew Turner: The responsibility of the principal regulator to an exempt charity is different from the responsibility of the Charity Commission to a non-exempt charity. The commission’s responsibilities are set out in section 7 on page 5, new section 1B of the 1993 Act and include five objectives. The principal regulator of an exempt charity has only one comparable objective, which is that of compliance. Therefore, he is introducing a greater level of regulation in to those charities that cease to be exempt, than would otherwise be the case.

Edward Miliband: That may be correct—a charity does cease to be exempt. However, it is part of the wider discussion on the level of obligations that charities face, whether it be the Church Commissioners or other charities. I do not understand why the powers that the Charity Commission will have in relation to the Church Commissioners, which will be on a level footing with the powers that they have in relation to other charities, will be particularly onerous. As we shall be discussing, the Charity Commission also has powers in relation to exempt charities, though subject to its relationship with the principal regulator. I hope that that satisfies the hon. Gentleman.

Andrew Turner: I accept that it is an explanation. What I am concerned about, however, is how many organisations will cease to be exempt as a result of clause 11(7).

Edward Miliband: I suggest that I write to the hon. Gentleman with a list. Let me briefly explain the process. In seeking a level playing field so that there would no longer be exempt charities that were not subject to regulation save for charity law purposes, the Government sought in all circumstances to find a regulator—other than the Charity Commission—which would be an existing regulator having a relationship with the charity concerned. In a number of cases it proved impossible, after discussion with the relevant charities, to find a suitable regulator other than the Charity Commission. The default position was therefore to move to the Charity Commission. I am happy to send the hon. Gentleman a list of the organisations that will now be regulated by the Charity Commission. I hope that that is satisfactory.
Amendment No. 96 concerns the National Lottery Charities Board and was tabled by the hon. Member for Cheltenham. The hon. Gentleman is correct that the National Lottery Charities Board is an exempt charity. It is being abolished and will be replaced by the Big Lottery Fund, which will not be a charity. That is to do with the way in which the Big Lottery Fund is being established. I believe that it is a company limited by guarantee.

Martin Horwood: We have established at length, and we may do so further later on today, that being a company limited by guarantee does not exclude one from charitable status.

Edward Miliband: Indeed. I am not an expert on the Big Lottery Fund, though the hon. Gentleman might be. However, it will not be a charity and it is not the intention that it be a charity. The point therefore does not arise. The hon. Gentleman may not have had it in mind when we tabled his amendment, but it turns out that we are removing the National Lottery Charities Board from the list of exempt charities in the National Lottery Bill which is currently before the House of Lords. That is being dealt with in that Bill, so I suspect that we shall in any case need to table an amendment for the purposes of tidying up of the process.
On the amendment that concerns affirmative and negative resolutions, I repeat what I have said before. The Committees of both the House of Commons and the House of Lords have examined the matter and are satisfied with the procedures that the Government propose, so I hope that the amendment will be withdrawn.
Finally, I believe that I misspoke when I said that the National Union of Students is itself charitable. The key point is that student unions are charitable but the NUS itself is not necessarily so. I can see some relief about that on the faces of hon. Gentlemen opposite.

Peter Bottomley: May I follow on from what the Parliamentary Secretary said rather than attempt a debate that the clause stand part? He mentioned various powers—I refer here to not to groups of charities but to individual ones. Does the Minister have the power under subsection 12(b) to help officially change the name of a charity? For example, if Queen Mary and Westfield College drops the “and Westfield” part of its name legally, as well as in common usage—it is now called Queen Mary College, but I am not sure whether it has changed its name officially—will the Minister be able to update matters by order? If not, might I suggest that he consult with people to consider how it can be done in some other way? For a college to change its name and have to be deregistered and re-registered as a new one would be hard way in which to go about things. That might be something that the hon. Gentleman will consider later. I do not want a response straightaway.
As for the Welsh Church, it will be interesting to know whether the Parliamentary Secretary has consulted or will consult with its main committee. That might be a good avenue to go down to see whether the assurances that have been given will work in practice.

Edward Miliband: I or my officials will be happy to talk to the committee to make sure that it is content. I do not believe that Ministers can change the name of charities, but charities can do so in consultation with the Charity Commission. We are coming to some clauses that deal with those issues.

Peter Bottomley: If the charity commissioners have the power to change under the schedule, I am reassured. If they do not, there may be a problem.

Edward Miliband: I shall investigate the matter and come back to the hon. Gentleman.

Martin Horwood: I am not entirely reassured by everything that the Minister has said, but I hope that we have explored the issues surrounding the amendments in sufficient detail for him now to consult further on the implications of some aspects of the Bill, especially the Big Lottery Fund. It strikes me as surprising that it will not have charitable status. It seems a slightly unhealthy sign that its focus is moving even further away from funding charities as the National Lottery Charities Board did. I raised that worry when we were debating the Lottery Bill.
As for the status of the universities of Oxford and Cambridge as opposed to the colleges and halls, I am somewhat reassured by what the Parliamentary Secretary said. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 11 ordered to stand part of the Bill.

Clause 12 ordered to stand part of the Bill.

Schedule 5

Exempt charities: increased regulations under 1993 Act

Martin Horwood: I beg to move amendment No. 98, in schedule 5, page 105, line 29, leave out paragraph 6.

Roger Gale: With this it will be convenient to discuss the following amendments: No. 99, in schedule 5, page 106, line 17, at end add—

‘Role of the principal regulator of exempt charities in increased regulation under 1993 Act

10. All references in Schedule 5 of this Act to “the Commission” mean the “principal regulator”, as defined in section 13(4)(b).’.
No. 105, in clause 13, page 16, line 27, at end insert—
‘(3A) The body or Minister shall have the same powers and responsibilities as the Charity Commission under this Act in relation to the charities of which he is principal regulator.’.
No. 92, in clause 13, page 16, line 32, leave out ‘made by the Secretary of State’.
No. 93, in clause 13, page 16, line 32, at end insert—
‘(c) in the absence of any principle regulator under paragraph (b), above, the regulator shall be the Privy Council.’.
No. 22, in clause 13, page 16, line 33, leave out subsection (5).

Martin Horwood: We tabled the amendment because the Bill expands the power of the commission to act for the protection of exempt charities. That sounds wise, but given our discussion on the exempt status of universities any power to expand the rights of any body, including the Charity Commission, over our universities is a major step and should not pass without debate. Currently, following the institution of a section 8 inquiry the commission may suspend any trustee, officer, agent or employee of the charity, order any debtor of the charity not to pay the debts or appoint receivers and managers.
We are familiar with that in terms of the rights of registered charities. They have become used to such powers and the Bill deals with many of their worries about the Charity Commission exercising such extensive powers over them. However, it is new for those powers to have been acquired quietly over the aforementioned universities of Oxford, Cambridge and those throughout the rest of the country. In effect, that would give power to the Charity Commission to remove Oxford dons from their posts. That would be a major step and one that should not pass without full debate. I shall be grateful if the Parliamentary Secretary can reassure us that that is not the case. I cannot see how the powers of the commission could be extended to exempt charities as set out in the Bill and for that not to apply. That is the reason behind amendment No. 98.
Amendment No. 99 and the other amendments tabled by the Liberal Democrats deal with some of the uncertainties under the Bill about who is regulated by whom. Parts of the 1993 Act refer to the commission in respect of regulatory functions, but it is not explicitly pointed out exactly how many of the powers extend to other principal regulators in relation to exempt charities. That is what amendment No. 99 addresses. The intention is to make it clear that references to the commission, in terms of the regulatory powers, also mean the principal regulators, as defined elsewhere in the Act. In other words, the amendment would make it clear that the regulatory powers that pertain to the commission in relation to non-exempt charities also pertain to principal regulators in relation to exempt charities.
Amendment No. 92 addresses the ability of the Secretary of State to decide who the principal regulator is for various exempt charities. The Bill gives him that power by regulation, and our amendment would take that power away. That connects with amendment No. 93; we assume that if no other regulator exists, the regulator will be the Privy Council. We tried to work out who was the current regulator of the Oxbridge colleges and halls, and it seems to be the Privy Council. Amendment No. 93 provides for the eventuality of the Minister and his advisers missing out a body, in terms of appointing a principal regulator. It leaves the Privy Council as the fall-back position, as we believe that it is the regulator in the case of one particular group of colleges and halls.

Andrew Turner: We are examining a particularly important change to the way in which universities are regulated. I am completely astonished that universities that have lain on their backs with their feet in the air and have allowed themselves to be regulated even more by HEFCE. Anyone who remembers the huge row that took place in the 1990s, when the University Grants Committee was abolished and replaced by HEFCE, will be amazed that universities got so wimpish and so incapable of opposing. They are now so incapable of protecting their position that the hon. Member for Cheltenham is absolutely correct when he says that it is possible for the occupant of a teaching post paid for by the university to be removed at the instigation of HEFCE. In those circumstances, one wonders how long university dons can keep the protection of free speech.

Edward Miliband: Come on!

Andrew Turner: Exactly the same arguments were deployed by universities at the time of the abolition of the University Grants Committee. Will someone make a complaint against a university lecturer, saying that he erred in some direction or other—[Interruption.] The Minister refers to charities, but for the moment universities are exempt; they do not have a regulator because they are trusted to regulate themselves. We are imposing a new level of regulation. We can quite understand that those who research controversial subjects, such as vivisection, embryology or weaponry, may find repeated complaints being made against them to the Charity Commission or to HEFCE.

Edward Miliband: I have the utmost respect for the hon. Gentleman, and he has made many coherent arguments during Committee, but this is not one of them. We are talking about regulation for the purposes of charitable law. The idea that a don teaching a controversial subject would be slung out of his post because the institution was not within the confines of charitable law is simply fantastic and wrong.

Andrew Turner: We will see. James II sent to a troop of horses to Oxford because it knew no argument but force and Cambridge knew no force but argument. He was trying to remove dons from the university because they were peddling theories with which he was not happy. In short, I have a great deal of sympathy with amendment No.98 and I am horrified that the universities have been so wet.
Amendment No. 105 is a probing amendment that fulfils the same function as amendment No. 99, which is to find out whether the responsibilities of the principal regulator are the same as those of the Charity Commission. If they are not, we are not creating the level playing field—equivalent regulation for all charities—which the Minister says is the whole purpose of the Bill. An increasing number of exempt charities are bodies that are the creatures of Government, yet the principal regulator has only one objective in respect of those institutions whereas the Charity Commission has five objectives in respect of all other charities. The Minister must explain why the level of regulation of exempt charities is less when one of the purposes of the Bill is to create a level playing field. If he is saying that the regulation will be exactly the same, at least that is consistent with the purposes of the Bill.
Amendment No. 22 is an attempt to deal with what I consider too broad a provision in clause 13 which, put simply, allows the Minister to amend the list of principal regulators and to make amendments subsequent to the enactment of the legislation which would change the powers of the principal regulator. Whether the powers are as I fear that they are, or they are as I suspect the Minister believes they are, there is no need for him to have the power to amend them.

Edward Miliband: I think that we are getting hot under the collar about the idea of Oxford dons being sacked without any good reason at all. Let me try and explain why that is the case.
All the universities are required to follow charity law. However, they are not monitored in that respect. The Bill would introduce proper monitoring of the way in which universities and other institutions follow charitable law. That is the context in which we have to understand the amendments and the clause.
Let me say something about the relationship between the principal regulator where that is not the Charity Commission, and the Charity Commission. It is fair to say that the situation is complicated and it is difficult to get the arrangements right. The principal regulator where that is not the Charity Commission, such as HEFCE or the Department for Culture, Media and Sport in relation to some museums and galleries, will be responsible for monitoring compliance with charity law. What happens if the principal regulator believes that there is a problem in the charity? It is for the principal regulator to say to the Charity Commission that, for example, an inquiry into the charity is needed. The Charity Commission then has all the powers at its disposal that it would have in relation to other charities to inquire into what is happening in the charity. The purpose of amendment No. 98 is to disapply those powers of the Charity Commission, but that would not be sensible because it would create the unlevel playing field about which the hon. Member for Isle of Wight is worried and which is implied by the amendment tabled by the hon. Member for Cheltenham.
It is then for the Charity Commission to conduct its investigations and to reach conclusions. What happens to those conclusions? Under the Bill as it stands, the Charity Commission can implement changes as it would implement in the case of any other charity, with one proviso. I draw the Committee’s attention to clause 14 which states:
“Before exercising in relation to an exempt charity any specific power exercisable by it in relation to the charity, the Commission must consult the charity’s principal regulator.”
If I may be so bold, I suggest that the useful discussion for us to have is of whether the requirement for the commission to consult the charity’s principal regulator is a sufficient safeguard.
As the Bill stands, the principal regulator where that is not the commission—HEFCE, in the case that we have been discussing—is in the driving seat of monitoring compliance with charity law. When HEFCE feels that an inquiry is necessary, it goes to the Charity Commission and says so. The Charity Commission then reaches conclusions, but before it can implement them, it must consult the principal regulator. I have not been asked to do so, but because I am a generous soul and we need the best Bill possible, I will consider whether consultation between the commission and the principal regulator is a sufficient safeguard. Although that is not what hon. Members were complaining about, I think that it is the most important aspect.

Peter Bone: I am following what the Minister says exactly. If the principal regulator thinks that something is wrong, it refers the matter to the Charity Commission, which investigates, and at present when it reaches a conclusion it only has to consult the principal regulator. Is he suggesting that the principal regulator should have a veto over what the Charity Commission says? What happens if the commission says, “We have investigated this, and this is what’s happened, but we don’t think any action should be taken,” but the principal regulator thinks that it should?

Edward Miliband: I do not think that a veto would be appropriate. The precise reason why we are giving the Charity Commission such powers in relation to exempt charities is that it has the expertise to work out what is happening in a charity, and it can do so only if it is commissioned to do so by the principal regulator. In addition, any decision that the commission makes is appealable by the charity concerned to our old friend the charity tribunal. However, I will consider whether the relationship between the commission and the principal regulator is a sufficient safeguard. I hope that that explains the background to the clauses that we are discussing and provides some reassurance on the amendments.
I do not think that amendment No. 98, which was tabled by the hon. Member for Cheltenham, is sensible, because it would remove from the Charity Commission powers relating to exempt charities that might be considered necessary by the principal regulator when it believes that there is a problem with that charity and that the Charity Commission should exercise its powers. I hope that on that basis, and in the spirit of achieving a level playing field, he will feel able to withdraw his amendment.
Amendment No. 99 it not sensible, either. We cannot give two different organisations the same powers over the same charities; that would make for a terrible mess. The amendment would move the powers listed in schedule 5 from the commission to the principal regulator. The problem is that the commission will be best able to inquire into and will have the expertise and resources to work out what is going wrong in a charity, when there is something going wrong, and to put it right. If it is the principal regulator that is to decide to put the commission in control, it is hard to say that the powers to take action should lie with the principal regulator rather than the commission. None the less, as I said, I think that we need to probe whether the commission’s relationship with the principal regulator is correctly drawn to provide the regulator with sufficient safeguards over what the commission does. I shall return on Report with the answer.
I am not sure whether amendments Nos. 92 and 93, which also stand in the name of the hon. Member for Cheltenham, are wise. Amendment No. 92 would remove the Secretary of State’s power to prescribe a principal regulator. I am not sure who would prescribe the principle regulator if the amendment were made, and in fact I fear that the amendment would have no effect, because elsewhere the Bill provides that references to regulations are normally to regulations made by the Secretary of State. It is right to provide that the Secretary of State should be able to say who the principal regulator for an exempt charity should be. I hope that the hon. Gentleman will not press the amendment.
Amendment No. 93 is about the Privy Council, which I do not think is an appropriate body, even as a backstop, for regulating. [Interruption.] My right hon. Friend the Member for Cardiff, South and Penarth (Alun Michael) clearly does not want the responsibility. The Privy Council is an august body. I take the point that we need to ensure that principal regulators are set out for all the different exempt institutions, but giving the power to the Privy Council, which advises Her Majesty, is not appropriate.

Martin Horwood: By confusing each other and sometimes ourselves, we have all demonstrated that this is a very complicated field. The niceties of who regulates whom are not always clear, nor are they set out in the Bill. In the event of an organisation being missed in the regulations that provide for regulators, who would be responsible? Who would be the principal regulator, if not the Privy Council?

Edward Miliband: I believe that the backstop would be the Attorney-General. However, I hope that such circumstances will not arise; I am sure that they will not, given the assiduousness of our officials.
Amendment No. 105 falls prey to the problem that I mentioned earlier: it would give dual powers to the Charity Commission and the principal regulator. However, it would not be sensible for two bodies to have the same powers over the same institution.
Finally, amendment No. 22 deals with Ministers’ ability to amend enactments. Essentially, that is to ensure that principal regulators can properly secure their functions. I should say to the hon. Member for Isle of Wight that clause 13(3) states that
“The compliance objective is to increase compliance by the charity trustees with their legal obligations in exercising control and management of the administration of the charity.”
That is now a job for the principal regulator. The part of the clause that the hon. Gentleman seeks to amend would simply ensure that if a principal regulator does not feel that it has the powers in statute to carry out those functions, we can make a technical amendment to allow it to have the powers set out in clause 13(3) so that it can promote compliance by the charity trustees with their legal obligations. I hope that, on that basis, the hon. Gentleman is satisfied.

Peter Bottomley: Will the Minister consider adding the words “at the request of the regulating authority”? I am not suggesting that the Government intend to have a coach and horses enactment, but the provision would give the Minister the power to make any change to any enactment, as long as it could somehow be hooked to a regulation. I ask the Minister to reflect on whether some limitation would be helpful.
Clause 13(1) reminds us that a Minister of the Crown can be
“the principal regulator in relation to an exempt charity.”
Will the Minister remind us of one or two of the exempt charities for which a Minister could be a regulator?

Edward Miliband: As always, the hon. Gentleman makes sensible points. I shall take the first one away and consider it.
The hon. Gentleman mentioned Ministers of the Crown. I do not think that I would be the principal regulator in relation to an exempt charity—at least I hope not. However, I shall give the Committee some examples, as the hon. Gentleman makes a fair point. The Qualifications and Curriculum Authority will be the responsibility of the Department for Education and Skills. A number of museums will be the responsibility of the Department for Culture, Media and Sport. The Royal Botanic gardens at Kew will be the responsibility of Ministers at the Department for Environment, Food and Rural Affairs. That generally covers the main areas where Ministers of the Crown will be involved.

Peter Bottomley: It might be perfectly obvious—if so, I have not found the right place in the Bill—but does that cover charities in England and Wales? What about charities that operate in other parts of the United Kingdom? Is there cross-regulation, duplicate regulation or a lack of regulation?

Edward Miliband: Separate legislation was passed for Scotland in 2005, and charities there will be covered by that legislation.

Martin Horwood: The Minister has made many reasonable statements; he is indeed a generous soul and a reasonable person. He has provided reasonable explanations for each part of the schedule that the amendments would change. The amendments would extend the powers of regulators to protect exempt charities. It seems to me that a dangerous combination of reasonable steps could still lead to an unreasonable outcome. I do not say that there is anything of James II about the Minister, but we have to allow for unreasonable successors or unreasonable Governments taking advantage of legislation. The very purpose of legislation to secure the liberties of bodies such as academic bodies which are a critical part of our democracy. As the hon. Member for Isle of Wight pointed out, their liberties are extremely important.
The Minister says that bodies such as the Higher Education Funding Council and the Department for Culture, Media and Sport may refer institutions that may have a problem under charitable law to the Charity Commission, which will then institute an inquiry. He implied that the commission already had the power to do that. He may intervene on me if I am mistaken, but I believe that section 18 of the 1993 Act does not apply to exempt charities. The specific power to intervene and to suspend a trustee, officer, agent or employee of the charity—it is a very broad power—did not previously apply to universities. A major step is being taken, which I want to remove.

Edward Miliband: I said that such bodies previously had to comply with charity law, but that they were not monitored. I agree that the powers are new. I am sorry to have to ask the hon. Gentleman to be consistent, but consistency is important. Why should such charities not have to comply with the principles of charity law and have the same powers exercised over them if they do not comply as other charities? It takes us back to the NSPCC-Eton issue. Surely, if provision good enough for the NSPCC, it is good enough for our universities.

Martin Horwood: I am grateful to the Minister. I shall return to the matter of level playing fields. I am not sure that the Bill sets out a level playing field for all charities. It certainly sets out different playing fields, and the logic of exempt status is that some bodies should have a different playing field.
It seems to me that if a good rationale can be advanced for treating a body differently, it should be treated differently. The academic freedom of our universities is important and needs to be defended. The Minister has conceded that the potentially draconian powers of section 18 of the 1993 Act did not apply previously to universities but that they will do so under the Bill unless the amendments are accepted.
As the Association for Charities has pointed out, the Charity Commission’s reputation among charities suggests that sometimes the powers can be used, if not abused, to an extent that can be upsetting or distressing and even unfair to many of the participants in charities; indeed, it may cause real grievances to arise. For the Government to step into that territory with our great universities seems a brave thing to do.
The universities are of course subject to charity law at the moment. Processes are available through the courts to anybody to force their compliance with charity law, but not to remove dons from academic posts. The regulator for the Oxford and Cambridge colleges will be the Charity Commission, not the Higher Education Funding Council for England. We are talking about the Charity Commission not—according to the Minister’s description—having the expertise to step in and look into the administration of charities, but having the expertise to rule on whether an Oxford or Cambridge college is complying with charity law.

Edward Miliband: I do not know where the hon. Gentleman went to university—his defence of Oxford and Cambridge colleges is incredibly passionate—but the proposals are not about removing dons from posts. They are about trustees fulfilling the purposes of the charity and complying with charity law.

Martin Horwood: The Minister is quite wrong. The phrase is a
“trustee, officer, agent or employee”.
It is not simply a trustee who can be removed.

Edward Miliband: In relation to charity law.

Martin Horwood: It may or may not be in relation to charity law, but the provision still extends that explicit power to Ministers in a way that was not there before. If we have mixed confidence in the Charity Commission’s ability to intervene in charities in the voluntary sector, giving it the power to intervene in colleges will stretch that confidence to breaking point. There is also a concern about a level playing field.

Peter Bottomley: Perhaps the hon. Gentleman could consider the issue the other way round. Instead of someone trying to require a university or college to do something with a member of its staff, is it not more likely that a university or college might have disciplined or dismissed a member of staff for reasons that somebody else—or even the person concerned—regarded as wrong and in need of challenge, upon which that person, whether the outsider or the insider, would go to the Charity Commission and say, “Will you please investigate?” That is a far more likely occurrence, to which the answer from the Charity Commission or regulating authority would normally be, “That’s an internal affair and it has no charitable effect.” Is that what the hon. Gentleman is worried about?

Martin Horwood: I am grateful to the hon. Gentleman, but I am not sure that that is exactly what I am worried about. As the Minister pointed out, a relevant case would have to relate overtly to charity law, but it is not entirely clear how a particular appointment would apply in that sense.
There is an issue concerning a level playing field. Having an exempt status and different regulators who can regulate with expertise that is appropriate to particular bodies does not necessarily provide a level playing field, but it does at least provide different playing fields for different areas of the new charity law. The logic of that is that those new regulators should not have inappropriate powers. However, the powers given to the Charity Commission in relation to the colleges of the ancient universities is not appropriate. I shall therefore not withdraw the amendment.

Andrew Turner: The Minister repeatedly asserts that the provisions are for the purposes of charity law but the problem is that, for purposes of charity law, the commission or HEFCE can intervene to require an institute to balance its books, for example, which means cutting staff. The commission or HEFCE might say, “Well, if you don’t cut staff, we will—and these are the areas where we will cut them.”

Edward Miliband: That is ridiculous.

Andrew Turner: It is all very well for the Minister to say that, but if we give powers to organisations without properly constraining them, they will use those powers. They might not intend to use those powers malevolently, but they will use them.

Martin Horwood: The hon. Gentleman is exactly right. We can imagine circumstances, such as those that have previously existed with registered charities, where campaigning activities or publications that might stretch the limits of what is charitable could be considered dangerous by the Charity Commission and where, on the precedent of my experience with Oxfam years ago, those charities could be subject to political pressure. Those are the kind of minefields into the Government are treading with their legislation.

Question put, That the amendment be made:—

The Committee divided: Ayes 5, Noes 8.

Question accordingly negatived.

Schedule 5 agreed to.

Clauses 13 and 14 ordered to stand part of the Bill.

Clause 15

Application cy-près by reference to current circumstances

Helen Goodman: I beg to move amendment No. 134, in clause 15, page 17, line 21, at end insert
‘, and
(c) whether or not the work for which the gift was made has already been completed.”’.

Roger Gale: With this it will be convenient to discuss the following amendments: No. 136, in clause 17, page 17, line 33, at end insert—
‘(1A) This section does not apply where the condition in section 14B(4A) has been met.’.
No. 101, in clause 17, page 17, leave out lines 36 to line 3 on page 18 and insert—
‘(b) the donor has not made a relevant declaration at the time of making the gift.’.
No. 23, in clause 17, page 17, line 36, after ‘statement’, insert ‘—
(i)’.
No. 24, in clause 17, page 18, line 3, at end insert
‘, and
(ii) how the donor should make such a declaration.’.
No. 25, in clause 17, page 18, line 8, leave out ‘making of the gift’ and insert ‘charity failing.’.
No. 100, in clause 17, page 18, line 45, at end insert—
‘(d) “cy-pres” means to amend the terms of a charitable trust as near (Cy-pres) as possible to the original intention of the testator or settlor, where the original intended purpose is impossible, impracticable or illegal.’.
No. 27, in clause 18, page 19, line 29, leave out ‘may’ and insert ‘must’.
No. 135, in clause 18, page 19, line 32, at end insert—
‘(4A) Where the property is valued at less than £5,000 and the charity has assets of over £100,000, the trustees may apply the property for purposes without reference to the Commission or the courts.’.

Helen Goodman: May I say how nice it is to see you in the Chair this morning, Mr. Gale? I shall speak to amendment Nos. 134 to 136, which are in my name.
Clauses 15 to 18—the cy-près clauses—refer to the practice in the charitable sector of having restricted and unrestricted funds. The distinction between restricted and unrestricted funds has a significant advantage, in that it often makes it easier for charities to raise money for particular pieces of work or causes. However, it can also be difficult to manage the restricted funds. They can be rather inflexible and, because of how the Bill is set out, they will continue to be too bureaucratic.
I shall give two examples of problems that I have seen arising from the treatment of such funds. The first is one that I referred to the other day—what I call the Leicestershire cobblers’ sons problem—in which money was given for a charitable purpose many years ago, but the need is no longer there. That is what is referred to in proposed new section 13(1A)(b) of the 1993 Act, which deals with cases in which
“the social and economic circumstances prevailing at the time of the proposed alteration of the original purposes”
have changed. In that instance, we need flexibility to spend the money on other work.

Andrew Turner: What kind of other work does the hon. Lady have in mind in the Leicestershire cobblers case? It seems to me that the words
“the spirit of the gift”
would cover many types of other work, such as Leicestershire poor artisans, or Leicestershire people who work in the footwear industry. How broadly would she be prepared to interpret paragraph (b)?

Helen Goodman: The hon. Gentleman makes my point. If he will be a little more patient, I shall come on to that.
As I say, one set of circumstances is where a gift was given a long time ago on a very narrow definition that no longer applies. The other set of circumstances in which there may be restricted funds that are now difficult to use is where money was raised for a particular piece of work and that piece of work has been completed, but it was not as expensive as anticipated, so some of the restricted funds remain.
I must apologise, Mr. Gale, as my spidery handwriting was slightly misinterpreted. In fact, I intended that amendment No. 134 should read “when the work for which the gift was made has already been completed”, not
“whether or not the work for which the gift was made has already been completed.”
In the cases where the restriction is so tight that the money can no longer be used for the purpose for which it was originally intended, money is sitting in the bank. That is obviously wasteful and it sometimes means that voluntary sector organisations raise extra money to do new pieces of work that they would not need to raise if they had greater flexibility.

Edward Miliband: My hon. Friend makes an excellent point. Can I offer her a small point of reassurance? She refers to the Charities Act 1993, and section 13(1) states:
“Subject to subsection (2) below, the circumstances in which the original purposes of a charitable gift can be altered to allow the property given or part of it to be applied cy-près shall be as follows—
(a) where the original purposes, in whole or in part—
(i) have been as far as may be fulfilled”.
That might take account of the legitimate concern that she has raised.

Helen Goodman: I am grateful to my hon. Friend for that reassurance.
I want to move on to amendments Nos. 136 and 135. Amendment No. 136 is an alternative way of implementing amendment No. 135, which hon. Members might find easier to understand. In amendment No. 135, I suggest that when the amount of money left is £5,000 or less, it should not be necessary for the charity to go to the Charity Commission to lift the restrictions on the funds. The amendment contains a further provision so that that applies only to large charities with assets of more than £100,000. That is because if it was a small charity and we gave the trustees complete flexibility to change the purposes for which the money could be used, we would change the whole work of the organisation. The measure is largely designed to help medium and larger charities to run their affairs more efficiently.
I want to anticipate some of the criticisms that could be made. One could be that people might have given money for one thing that could then be used for anything else, but, of course, that is not true because it will be used by a charity with clearly laid out objectives. To address in part the point made by the hon. Member for Isle of Wight, money for Leicestershire cobbler’s sons would not be spent on horticulture or animals. It would be spent, if possible, on other work with children in Leicestershire, for example.

Peter Bone: I am not sure why the hon. Lady distinguishes between a large and a small charity. With a small amount of money—less than £5,000—the measure should apply across the board rather than distinctly in favour of a large or medium-sized charity.

Helen Goodman: That would be a more liberal interpretation. I made the distinction because I felt that a large charity would have more scope to shift the money to other similar work than a small charity, where a shift could change the nature of the organisation in toto.
Another point that has since been made to me is that some later clauses, such as clause 41 and those around it, deal with some of the small charity issues. My main objective is to reduce bureaucracy. We spoke about that last week. Rather than giving the Charity Commission a general objective to reduce bureaucracy, what we should have done as we went through the legislation, was to look at particular instances in which we were imposing a bureaucratic burden. We expect trustees to behave in a responsible way. We put various obligations on them and we should treat them like adults. The notion that someone sitting in the Charity Commission 300 miles away, should be second-guessing the ways in which small packets of money are used seems to be totally out of time.
I would like to draw an article to the attention of hon. Members, on the front page of this morning’s Financial Times with the headline,“Call to use dormant bank funds for charity: Treasury backs report on putting millions to use.” The article begins:
“Ambitious plans for a new financial institution to take over and invest the hundreds of millions of pounds lying unclaimed in British bank and building society accounts will be set out tomorrow in a Treasury-sponsored report.”
and so it goes on. If the Government are considering transferring money that was never given for any purpose, which totals several hundreds of millions of pounds, we should consider sympathetically shifting small amounts of money within charities and that is the purpose of those amendments.

Martin Horwood: I am extremely sympathetic to the instincts behind those amendments. With some reassurances from the Minister, I would be content to support them. There is the classic example, which applies to large rather than small charities, of tightly drawn emergency appeals.
The rehousing of Bangladeshi flood victims was the classic and often quoted example at Oxfam. It was an enormously popular appeal that raised huge amounts of money across a number of different charitable organisations both in the UK and internationally. In due course, all the victims were rehoused, but millions of pounds remained for that specific purpose. The charities were in the ludicrous position of having to wait for another flood to be able to apply those funds. It is not clear that the existing legislation, which refers to matters such as social and economic circumstances, allows those emergency charities to have that let-out. Therefore, the hon. Lady’s amendment may be necessary.

Edward Miliband: I will deal with my hon. Friend’s amendment in my remarks. Briefly, clause 17 is designed precisely to respond to the circumstances that the hon. Gentleman raised in which cy-près can be applied to gifts made in response to certain solicitations. Therefore, it marks significant progress in relation to the specific case that he raised and the worries that he has. I hope that he recognises that.

Martin Horwood: I am grateful for the Minister’s intervention, and my subsequent amendments also relate to clause 17. However, I am not entirely sure that he is quite right. The principle of cy-près would still require the deviation from the original charity purpose under current law to be reasonably close.
If the appeal had specifically mentioned a particular country, it would have been difficult for that appeal money to be directed to another country, which would have been necessary in the Bangladesh case. Therefore, the Minister should look kindly on the amendment because it addresses a dimension of flexibility that is desirable in law and that would not otherwise be there. 
My only reservation with the hon. Lady’s amendments is that we need to tread carefully—with respect to both small charities as well as large ones—to preserve donors’ as well as charities’ rights. It is important that donors are confident that their donations are applied to the purposes for which they give them. If a charity chooses to invite donations to what is in effect a restricted fund, it is important that there is a general legal principle that is reasonably easy to enforce and that will apply those funds to such purposes. Otherwise, charities will be able to spend money willy-nilly on different matters.
I am seeking reassurance from the Minister that none of the hon. Lady’s amendments or any amendments that he might introduce expressing the same ambitions will give too much scope to charities or undermine the principle of cy-près. It is important, and it must be protected. I hope that he will address that worry in my remarks. Otherwise, I am extremely sympathetic to the hon. Lady’s amendments.
My amendments in this group are Nos. 101 and 100. Amendment No. 101 would apply to the statement that must be made by the fundraiser at the moment of solicitation. One can imagine an example of a fundraiser, planning hopefully for a meeting with Bill Gates or some other major donor, who has read the measure that requires the solicitation to be
“accompanied by a statement to the effect that property given in response to it will, in the event of those purposes failing, be applicable cy-près as if given for charitable purposes generally, unless the donor makes a relevant declaration at the time of making the gift.”
The fundraiser panics slightly, because he is not quite sure what that means. He seeks advice from a lawyer who tells him that, to be safe, he must hand an even more convoluted declaration to Bill Gates during the meeting to ensure that he is covered under the Act in case the charity needs to apply for donations cy-près at some later stage. He might also take advice from a fundraising consultant such as Lord Levy, who might encourage him to make a loan instead of a gift to get around difficult regulations, although that might be a mischievous suggestion. In any case, there is a need for greater simplicity in clause 17, and that is what amendment No. 101 seeks to create.

Edward Miliband: Again, I know that it is not the hon. Gentleman’s intention, but—and I hope to short-circuit this discussion—I fear that his amendment will do precisely what he warned us earlier against doing. By substituting his wording for the words in clause 17(2), convoluted though they might be, he would transfer the onus from the charity, which would offer the donor the opportunity to make a declaration, to the donor him or herself, who would have to take the initiative and make the declaration. I fear that the amendment will not achieve his purposes, but will work against them.

Martin Horwood: I am grateful to the Minister, but if he thinks about it for a moment, he will see that that would be a desirable outcome. It is always generally desirable for donations to be received with as few restrictions as possible. That is generally a good thing from charities’ point of view. If the donor wants to make a restriction, it is up to them to make it clear what that restriction is and to tell the charity when the donation is solicited whether there are any particular concerns or restrictions, or projects to which that donor wishes it to be applied.
Edward Milibandindicated dissent.

Martin Horwood: The Minister shakes his head, but I have been in that situation as a fundraiser, and it is exactly right. I would far prefer the onus to be on the donor to restrict a donation, rather than on the charity. I am proposing a simplification that would be more practical for fundraisers in the application of the Act. I hope that he will look kindly on it.

Edward Miliband: I will not.

Martin Horwood: Well, the Minister is mistaken in that case. I thought he was a generous soul, but perhaps we were misled. Amendment No. 100 seeks to remove the requirement for fundraisers to understand Norman French to understand the Bill.

Andrew Turner: The relevant words in the hon. Gentleman’s recent speech were “I have been a fundraiser, and I know what it’s like.” He is trying to make it easy for fundraisers and not for donors. Donors are usually quite interested in the purpose to which their generosity will be applied. I am not an enthusiast of amendment No. 101, and I understand the purposes behind the hon. Lady’s amendments.
Amendments Nos. 23 and 24 are designed to give guidance on how to make the declaration. It is all very well saying that a declaration must or must not be made, but it is helpful to have a cast-iron declaration to hand if a donor wants to sign it. That would not be a bad thing for charities to bring forward.
Amendment No. 25 relates to the Lanesborough hotel case. If a donor makes a donation and the charity fails, is the donor entitled to the value of the original donation or to the value of the asset at the time of the charity’s failure? The Lanesborough hotel—the case involves a leasehold reversion not a charity—used to be a hospital, and before that it was a property owned by the Duke of Westminster. He gave the property for use as a hospital and it served as such for a while, but then it ceased to be a hospital and the Duke of Westminster had it back.
Let us be clear: if we do not have such a provision, we put donors off. I might be willing to give something in the hope that it would be used to set up a monastery, but 200 years later along comes Henry VIII who says to me, “We’re not having any monasteries, but you can have the value of this handkerchief.” Actually, Henry VIII was not as honest as that because he would not have given anyone the value of a handkerchief, but the principle is clear. When the asset is a real asset, it is sensible to provide for the donor to be able to reclaim the asset or its current value, rather than merely the value of the asset at the time it was donated. Will the Parliamentary Secretary say who will decide the value of the asset? What was the value of Rievaulx abbey at the time that it was dissolved by Henry VIII? What was its value at the time that it was donated—if it was donated?
Martin Horwoodrose—

Edward Miliband: He knows. [Laughter.]

Martin Horwood: I am grateful to the hon. Member for Isle of Wight for giving way, although it probably was not wise of me to intervene at that precise moment. I am not about to provide him with the answer to the question. I am worried because his idea about the value of the gift at a later stage is not practical because of all the changes that might have taken place in the meantime. He says that he is worried about donors being put off, but surely what would put them off the most is to be presented with a complicated declaration on the possible failure of the charitable purpose.

Andrew Turner: The donors would be asked about the failure of the charitable purpose anyway, so they might as well have something that makes it clear whether they were or were not given such a declaration and the opportunity to sign it. That would clarify matters. A donor will want to know that his donation will be used for the purpose for which he intends it to be used and that, in the event of a failure, he will have the opportunity to recover the property and, in all probability, give it for another charitable purpose.

Peter Bone: In my constituency, we have the Rushden memorial clinic; donations were given to provide hospital and medical facilities. We did not envisage that the clinic would be closed, that houses would be built on the site and that the clinic would be moved away from the town. Donors are unhappy about that sort of thing. The proposal for a declaration to ensure that donors would receive their original money back would discourage such things from happening.

Andrew Turner: I agree with my hon. Friend. The Frank James memorial hospital in East Cowes is a similar example. It was paid for out of the pay packets of people who worked for what is now G. K. Westland, which used to be the British Hovercraft Corporation and, before that, Saunders Roe, which made the Empire flying boats. Exactly the same circumstances apply. The hospital was taken over by the health service, of course, but it would be sad for the donors to see that asset lost. It upsets people to see an asset that they, their parents or grandparents gave for the benefit of their town being absorbed into a bigger asset in a town many miles away, albeit perhaps providing a similar service. Where people give money to a charity, they are entitled to expect the money to be spent in accordance with their wishes. That is the purpose of amendment No. 27.

Alun Michael: Would the value of the asset be net of the additional investment or additional value that had been put in over the years—perhaps by the health service or another organisation—including the value of good will?

Andrew Turner: It is perfectly fair to say that the value should be net. If a person gives a piece of land, at the end of the process they are entitled to withdraw the value of the land, not the value of the buildings on the land. That is perfectly fair, but it is also fair that where a charity fails, the donor should not merely receive the value of a silk handkerchief.

Tom Levitt: I rise briefly because the hon. Gentleman’s argument reminds me of a local case. Describing it in detail would not be long enough for a speech, but would be too long for an intervention. It involves the Devonshire Royal hospital in Buxton, which was given to the nation by the Duke of Devonshire about 100 years ago. It became part of the NHS on its formation, but a few years ago Stockport health authority, which then ran it, decided that it was surplus to requirements as a hospital and no longer wished to use it. I had an amusing interview in my constituency office, which I think I can now disclose under statutes of limitations, with an agitated Duke of Devonshire, who said, “For heaven’s sake, they’re not going to give it me back are they?” He said that on the grounds that the building had become a liability rather than an asset, owing to the amount of money that was required to run it.
I would not like the word “must” to be included, because that could mean giving a liability back to donors, rather than the asset that they thought they had donated in the first place. That is my argument against the hon. Gentleman, but I cannot resist pointing out that amendment No. 100, tabled by the hon. Member for Cheltenham, is probably the classic embodiment of the Cheltenham principle, being harmless if not entirely necessary.

Andrew Turner: I fear that the hon. Gentleman heard me mis-express the purpose of the amendment. Proposed new section 14B(4) of the 1993 Act says:
“If a scheme provides for the property to be transferred to another charity, the scheme may impose on the charity trustees of that charity a duty to secure that the property is applied for purposes”
of the charity. My assertion is merely that the new subsection (4) should read that the scheme “must impose” that duty on the trustees. If a property is given for any purpose, it is there for that very purpose, whether it is with charity A or with charity B. I do not see why there is an option for the charity to transfer that property for a different purpose.
I am also concerned about the principle of clause 15, because as far as I can see clause 13 provides a broad power for varying the use of property. For that reason, I may wish to oppose clause 15 on stand part.

Edward Miliband: The hon. Gentleman threw in a googly at the end, but I shall try to deal with it nevertheless.
I shall start with the worthy amendments tabled by my hon. Friend the Member for Bishop Auckland (Helen Goodman). I have dealt with amendment No. 134, which deals with work that has been completed, and hope that I have reassured her about the 1993 Act. Briefly, I am sympathetic to her de minimis desires, which are expressed in amendments Nos. 135 and 136. The most acute of her very acute points was about charities that had built up lots of small sums from appeals spread over hundreds of years, which would have to go through the process of cy-près with the Charity Commission, issue new purposes and so on to get those amounts of money dealt with. I undertake to consider whether there is a case for a de minimis provision in relation to cy-près; I hope that that satisfies my hon. Friend.
In amendment No. 101, the hon. Member for Cheltenham is contradicting his own wise words, because he is transferring the onus. If someone gives money to a certain appeal, but the money is to be used for a completely different—albeit worthy—charitable purpose, it is fair enough that the person giving money to the appeal should know that, and should be offered the chance to make a declaration saying that that cannot happen. That is the long and the short of what the provision does.

Martin Horwood: The circumstances that we are talking about—cases in which a charitable purpose eventually fails—are not common. They are extreme circumstances that need to be catered for. The difficulty of trying to insert complicated declarations as a matter of course is that they can disrupt the process of fundraising, whether that is being carried out through a small donation form, a coupon advertisement, or a delicate conversation with a major donor. The declaration process may jeopardise the donation and result in less money for the beneficiaries or the charitable purpose for which the money is being raised. It is simply impractical to insist on such complex declarations in those circumstances.

Edward Miliband: I am slightly sympathetic to what the hon. Gentleman says. In a sense, we hold the opposite point of view from the hon. Member for Isle of Wight, who, through his amendment, seeks more reassurance about the donor being advised on how to make the declaration. I am pretty certain that what he wants is implicit in the wording of new section 14B(2)(b), and on that basis I hope that he will accept that the wording in the Bill should stand. I shall come back to the point made by the hon. Member for Cheltenham later.

Peter Bottomley: The Minister may come to this later, but why does he not just change cy-près to “as near” throughout the Bill?

Edward Miliband: Cy-près is a sort of long-standing convention and it is well understood by those who need to understand it. [Laughter.]
Moving swiftly on, I disagree with the hon. Member for Isle of Wight on amendment No. 25. He seems to be confusing a charitable donation with an investment. If one makes a charitable donation, one cannot expect its value to increase and to get back that value if the charity fails, but that would be the effect of his amendment.
First, if one gives money to a charity, one does not expect to get it back; secondly, if in extreme circumstances a charity fails and one does get it back, one cannot expect it to have increased in value. I fear that if one gave a handkerchief 200 years ago, one would get back a handkerchief or the monetary equivalent. That is just one of those things.

Andrew Turner: Perhaps I did not express myself clearly; what I am saying is that if one gave Rievaulx abbey 200 years ago, what one might get back today is a handkerchief, because the value of the abbey then was 7s 6d, which is about how much—or even less—a handkerchief costs nowadays. I am not suggesting that the donation should be an investment, but what if a donation increases in value? If someone gives a charity a piece of land, it is reasonable to expect to get back the piece of land, not just a handkerchief.

Edward Miliband: I fear that that is not so. It is hard lines for the person who gets back 7s 6d or the price of a handkerchief. Under the hon. Gentleman’s amendment, the wording would mention a sum equal to the relevant value at the time of the charity failing, but that is tantamount to making it an investment, because one essentially benefits from the capital growth of the gift.

Martin Horwood: If I can be as generous to the Parliamentary Secretary as he has been to me, I might just assist him. Surely, the investment is a red herring. The point is that so many changes in the nature, structure and quality of the property might have taken place in the intervening years that it would be practically impossible to disaggregate the value due to the donor from the value that was due to the charity.

Edward Miliband: That is helpful. I agree with the hon. Gentleman.
Amendment No. 100 is unnecessary, because the terms of “cy-près” are set out in a wider sense in section 13 of the 1993 Act, a part of which I read to my hon. Friend the Member for Bishop Auckland. It states:
“where the original purposes, in whole or in part...have been as far as may be fulfilled; or...cannot be carried out, or not according to the directions given and to the spirit of the gift”.
That is a wider interpretation than would apply under the amendment, which refers to circumstances:
“where the original intended purpose is impossible, impracticable or illegal”.
I hope that he will accept that there is a sound definition for “cy-près” and will not press his amendment.
On amendment No. 27, which deals with “may” or “must”, I hope that I can reassure the hon. Member for Isle of Wight that his concerns are covered in clause 18. Proposed new section 14B(3) makes it clear that the matters defined in subsection (2)—when cy-près happens—relate to the spirit of the original gift and the desirability of securing that the properties apply for charitable purposes that are close to the original purposes. He can be reassured that when the transfer described in subsection (4) takes place, it will have to be applied for charitable purposes close to the original purposes. He may ask, “Why use ‘may’ rather than ‘must’”? That is a good question. The answer is that the charity to which the transfer is taking place already has similar purposes to those from which the transfer is made, so it will not be necessary for the scheme to impose a duty, because the intentions behind the duty will already be fulfilled.
Let me turn again, briefly, to a matter raised by the hon. Member for Cheltenham. We have described the right balance between the needs of charities to be able to make appeals and the protection of donors. I am struck by what the hon. Gentleman said, particularly about newspaper appeals or elsewhere and the potential difficulty of setting out a clear space for a declaration from the individual. He made a good point and I shall take it away and return to it on Report.

Helen Goodman: I am grateful for the moral support of the hon. Member for Cheltenham, but I am slightly disappointed that the hon. Member for Isle of Wight did not give a little bit more praise for a deregulatory measure on which we had cross-party consensus. In view of the Minister’s words, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Motion made, and Question put, That the clause stand part of the Bill:—

The Committee divided: Ayes 11, Noes 4.

Question accordingly agreed to.

Clause 15 ordered to stand part of the Bill.

Roger Gale: Before we proceed, it might be useful for Members to know that there is a likelihood that the Committee will sit between 8 and 10 o’clock this evening, as well as in the afternoon sitting between 4 and 7 o’clock. Members might wish to make the necessary adjustments to their diaries.

Clauses 16 to 19 ordered to stand part of the Bill.

Clause 20

Power to give specific directions for protection of charity

Andrew Turner: I beg to move amendment No. 35, in clause 20, page 21, line 1, leave out
‘the Commission considers to be expedient in the interests’
and insert
‘is necessary for the protection of the property’.
The amendment is straightforward. It would remove the power of the commission to do all sorts of things that it might think expedient in the interests of the charity, and instead restrict the power to things that the commission considers necessary for the protection of the charity’s property, which is more or less the position under section 19 of the 1993 Act. I do not really understand the case for broadening the commission’s power. The commission would be given a fairly broad power in place of a fairly narrow one and the power would be exercisable before the outcome of any inquiry. The commission would not have to wait for the inquiry before deciding what to do, whereas later parts of the Bill provide for the commission to do things following the outcome of an inquiry.

Martin Horwood: I am pleased to support the amendment, which seems sensible. The hon. Gentleman has discovered something that gives unnecessary latitude to the Charity Commission. If an order under the provision were the subject of an attempted challenge by trustees or by a charity, the trustees or the charity would have to find some error in law on the part of the Charity Commission, yet the commission would need only to justify its decision in terms of expediency. That seems a very low test indeed, so the hon. Gentleman’s amendment is well thought out and should be supported.

Edward Miliband: Let me briefly explain the intention of the clause. At the moment, the Charity Commission has a draconian power to suspend or remove trustees from membership of the charity, but it has no intermediate set of powers. A number of cases have arisen in which annual general meetings have not been held and annual accounts have not been submitted because of, for example, a dispute with a charity. In such circumstances, the commission faces Hobson’s choice: it can either do nothing or take extreme action to suspend trustees.
The intention behind the clause is to give the commission the power to give specific directions if it considers that necessary and in the interests of the charity. That would, of course, be reviewable by the charity tribunal. The problem with the amendment is that it would restrict the powers to those necessary for the protection of the property. The hon. Gentleman says that that is in the 1993 Act; that may well be the case, and that is precisely the problem. The commission would be pushed back to either facing the possibility of using the very extreme power to suspend trusteeship, or sitting on its hands.
The hon. Gentleman raised the question of use of the commission’s powers not having to wait for the outcome of the inquiry. It may not be much reassurance, but that is true of all the commission’s powers, which can be exercised any time after the start of the inquiry. That has always been the case. I hope that, on that basis and in that context, the hon. Gentleman will accept my reassurance.

Andrew Turner: I appreciate the Minister’s words, which are meant to reassure, but am sorry to say that they do the opposite. The power that the commissioners have at the moment comes into play when they
“are satisfied...that... that there is or has been any misconduct or mismanagement in the administration of the charity; or...that it is necessary or desirable to act for the purpose of protecting the property of the charity or securing a proper application for the purposes of the charity of that property or of property coming to the charity”.
I can think of very few improper ways in which trustees could act that would not, in one way or another, imperil the proper application of the property, except when the trustees were merely making decisions on discretion—they could have spent the money on A, but will spend the money on B.
I do not see why the commission should need an intermediate power. If the purpose of the Bill is to enable charities to get on with running their own affairs, there must be a high level of test before the commission is allowed to interfere. As the hon. Member for Cheltenham said, the power is virtually unappealable. [Interruption.]
The Minister says that it is not unappealable in law, and of course that is right, but it is unappealable in practice because the commissioners would have to demonstrate only that they considered it expedient and in the interests of the charity to do one of the things listed at the bottom of page 20. Yes, their decision would have to be reasonable and rational, but all they would have to say is, “We thought it was expedient.” The tribunal would just say, “Well, you thought it was expedient—sorry, appellant, you’ve had it”.

Edward Miliband: The hon. Gentleman is missing out the rest of the words in the clause:
“in the interests of the charity”.

Andrew Turner: Yes, the intervention has to be expedient in the interests of the charity, but the commission may well take a different view from that of the trustees on what is expedient. That is the point. It may be expedient to invest money in A or in B. [Interruption.] The Minister says that it is not that wide.

Alun Michael: Surely it is generally the case in law that in matters of judgment, the judgment lies with those exercising the judgment, and that what the hon. Gentleman is talking about would not be in question.

Andrew Turner: Of course that is normally a matter of law, but the provision gives the power to take any action that the commission considers expedient. The right hon. Gentleman shakes his head. My concern is that it is too broad a power and that it does not require any demonstration of failure. It requires an inquiry to be established. It does not require the inquiry to report.
I know that the Minister has been busy over the weekend and therefore might not have had a chance to read “Power without Accountability”. It repeatedly provides examples of the Charity Commission exercising, not power, but discretion in a way that is difficult to applaud. Let me put it no stronger than that. It is not going to be in the interests of the good governance of charities to give the Charity Commission those broad powers of discretion which, although technically appealable, are impossible to appeal successfully.

Question put, That the amendment be made:—

The Committee divided: Ayes 6, Noes 9.

Question accordingly negatived.

Clause 20 ordered to stand part of the Bill.

Clauses 21 and 22 ordered to stand part of the Bill.

Clause 23

Participation of Scottish and Northern Irish charities in common investment schemes etc.

Edward Miliband: I beg to move amendment No. 171, in clause 23, page 24, leave out lines 14 to 17 and insert—
‘(a) a Scottish recognised body, or
(b) a Northern Ireland charity,’.

Roger Gale: With this it will be convenient to discuss the following amendments:
Government amendments Nos. 172 to 174.

Edward Miliband: Those are purely technical amendments that take account of a recent change in Scottish charity law and which cover ourselves for possible future change in Northern Ireland charity law. I hope that the Committee will be able to change them on that basis.

Amendment agreed to.

Amendments made: No. 172, in clause 23, page 24, leave out lines 32 to 35 and insert—
‘(a) a Scottish recognised body, or
(b) a Northern Ireland charity,’.
No. 173, in clause 23, page 24, line 44, at end insert—
‘(3A) After section 25 insert—
“25A Meaning of “Scottish recognised body” and “Northern Ireland charity” in sections 24 and 25
(1) In sections 24 and 25 above “Scottish recognised body” means a body—
(a) established under the law of Scotland, or
(b) managed or controlled wholly or mainly in or from Scotland,
to which the Commissioners for Her Majesty’s Revenue and Customs have given intimation, which has not subsequently been withdrawn, that relief is due under section 505 of the Income and Corporation Taxes Act 1988 in respect of income of the body which is applicable and applied to charitable purposes only.
(2) In those sections “Northern Ireland charity” means an institution which is a charity under the law of Northern Ireland.”’.
No. 174, in clause 23, page 25, line 2, leave out ‘and 25’ and insert ‘to 25A’.—[Edward Miliband.]

Clause 23, as amended, ordered to stand part of the Bill.

Clauses 24 to 26 ordered to stand part of the Bill.

Clause 27

Restrictions on mortgaging

Edward Miliband: I beg to move amendment No. 55, in clause 27, page 29, line 17, after ‘(2)’, insert ‘above’. This is a minor amendment suggested by the parliamentary draftsman to correct a drafting error.

Amendment agreed to.

Clause 27, as amended, stand part of the Bill.

Clause 28

Annual audit or examination of accounts of charities which are not companies

Helen Goodman: I beg to move amendment No. 133, in clause 28, page 29, line 41, leave out ‘£10,000’ and insert ‘£20,000’.
This is another measure to reduce the amount of bureaucracy that small or medium sized voluntary sector organisations have to deal with. The Minister said on Second Reading that the number of charities that will no longer have to have a full audit will be reduced by 3,000 by this section of the Bill. Since an audit costs about £5,000 on average, that will in effect inject £15 million into the sector. That is a number that we should be trumpeting from the roof tops.
The clause goes on to suggest that those charities with an income of between £100,000 and £10,000 will not need a full audit but an independent examination. The purpose of the amendment is to raise that limit of £10,000 to £20,000, which will mean that more organisations will not require even an independent examination and will manage without any independent check on their bookkeeping. It is another simple measure to reduce the amount of bureaucracy faced by small voluntary sector organisations.

Martin Horwood: I applaud the intention behind the amendment, but we have to be careful about always regarding something like an audit as an imposition on a charity that is not in its interests. As I have mentioned before, we are talking about a huge number of organisations; according to the National Council for Voluntary Organisations, 56 per cent. of the voluntary sector has an annual income of less than £10,000. We are talking about a huge area of the necessary regulation of charities. To exempt another large swathe of small charities might open the door for exactly the kind of difficulties that we have already discussed.

Edward Miliband: Does the hon. Gentleman agree that my hon. Friend has a point about deregulation and that the best way to deal with it would be a comprehensive review of all the thresholds in the Bill a year after Royal Assent?

Martin Horwood: I am pleased by that intervention by the Minister. I would say yes and am happy to leave it at that, but to complete the essential point, it can be in the interests of donors, charities and the reputation of the charity sector as a whole for necessary audit and examination of accounts to take place, and that guards against fraud.

Andrew Turner: We have heard about the review before, and I think it is a good thing. Can the hon. Gentleman point out to me the power that the Minister will have to make decisions as a result of that?

Martin Horwood: I think that I am grateful to the hon. Gentleman for intervening. I cannot, but I will look forward to the Minister’s explanation of where that might be.

Peter Bone: I should declare an interest as a chartered accountant. I urge the hon. Lady to press her amendment. We are not talking about a set of accounts but about having to have them audited. An audit is frightfully expensive and is a great blow, in percentage terms, to the charity.

James Duddridge: I thank my hon. Friend for giving way. As a chartered accountant—[Interruption.] I am not a chartered accountant. Will my hon. Friend, as a chartered accountant, give me a suggestion of the cost involved? In my experience, well over £1,000 is common and that would represent a significant percentage even of £20,000. I support my hon. Friend in asking the hon. Lady to press the amendment despite reassurances from the Minister that things will be reviewed a year later.

Peter Bone: That is exactly the point. In many other areas, the Government have recognised that fact and increased thresholds so that organisations do not have to have audits. It is an important point and a good amendment.

Stephen Williams: I am a chartered tax consultant rather than a chartered accountant. In my experience, lots of chartered accountants—I am sure that the hon. Member for Wellingborough (Mr. Bone) is not an exception—do such audits for charities on a no-fee basis, as part of building links with the community. Would he not advocate that his fellow practitioners audit small charities on that basis? Then there would be no fee and no need to fear the high charges that he mentioned.

Peter Bone: The hon. Gentleman makes a point, but realistically, it is an unnecessary imposition on a charity with only £10,000 of income.

Edward Miliband: This has been a lively debate, with interesting views from all parties. My hon. Friend the Member for Bishop Auckland raises an important issue, and the hon. Member for Wellingborough spoke eloquently as an accountant about the costs that accountants can charge and the imposition that that might make on small charities.
We need to examine the measures properly, consulting all charities that might be affected. The hon. Member for Isle of Wight drew attention earlier to the relatively small number of responses on another threshold issue. I reassure him that there are order-making powers in the Bill to vary all the financial thresholds.
My final point, partly in answer to the hon. Member for Wellingborough, is that an examination can be done on charities. It is a lesser scrutiny than an audit and is done by someone competent but not professionally qualified, and an independent person must be involved.
The issue raises important points, but the hon. Member for Cheltenham cautions us against leaping too quickly into the dark. A thorough review is the right way to go. I hope that my hon. Friend will withdraw her amendment.

Helen Goodman: I am grateful to the Minister. One of the nice things about the Bill is that because he has only just arrived and is not really responsible for it, we can be critical of it. Given that everybody keeps saying how much consideration has gone into the Bill, I think that the threshold should have been considered before. It is most unfortunate that thresholds will be established this year when there is going to be a review and everyone will have to find out what the new thresholds are in a year’s time. Despite that and notwithstanding the blandishments of Opposition Members, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 28 ordered to stand part of the Bill.

Clauses 29 and 30 ordered to stand part of the Bill.

Schedule 6

Group accounts

Edward Miliband: I beg to move amendment No. 58, in schedule 6, page 110, line 19, leave out ‘company’ and insert ‘charity’. Again, the amendment simply corrects a drafting error.

Amendment agreed to.

Schedule 6, as amended, agreed to.

Clauses 31 to 33 ordered to stand part of the Bill.

Clause 34

Charitable incorporated organisations

Question proposed, That the clause stand part of the Bill.

Alun Michael: I apologise for intervening at this stage, but I have a deep reservation about accepting schedule 7.

Roger Gale: Order. We are at clause 34.

Martin Horwood: On a point of order, Mr. Gale. Clause 34 refers to schedule 7.

Roger Gale: We have not reached schedule 7.

Alun Michael: The clause says:
“Schedule 7, which makes provision about charitable incorporated organisations, has effect.”
My reservation, which I hope the Minister will agree to consider by Report, is that the schedule incorporates a pointless acronym into law.

It being One o’clock, The Chairman adjourned the Committee without Question put, pursuant to the Standing Order.

Adjourned till this day at Four o'clock.